Translation:Mathematics is an important subject at that university.
Is it correct to say mathematics is a faculty at the university? Not sure if I'm abusing terms here.
A university's mathematics program isn't simply a subject, but a complete branch of operations comprising the study of a subject, scheduling, hiring of tutors, provisioning of classroom space, and design of programs of study to integrate mathematics into both mathematics degrees (both "mathematics" and specialized fields such as statistics), degrees founded in mathematics (biological, physical, and computer sciences), and degrees requiring mathematics as general education.
I understand "faculty" to refer to the people who teach, not to the subjects they teach. My sense here is that the meanings are unrelated. The first English word to come to mind that's related to fako is the loanword "fachwerk" - which describes a house with dark visible beams. (Google: fachwerk house.) The beams make little compartments, and university "subjects" are little compartments of knowledge.
fako = cubby hole.
In fact en is the better choice. You'll see both, but en is used more often and by more authors. It comes down to whether you see a university as an institution or as a center for learning. I also wonder whether ĉe is due to national language influence.
"ĉe la universitato" could mean "near the university."